The Roots of Profit Culture

The Roots of Profit Culture

The profit ethic arose in eighteenth-century Great Britain, but it reached its zenith of acceptance by both business and the public in America during the period between the Civil War and World War I. This era-known as the Age of Enterprise-was one of accelerated economic development. The great drive in UK society was aimed at industrialization. Everyone was in favour of progress, and progress in the rural and agrarian society of that period was closely tied to the goal of rapid industrialization. Such a powerful social goal was bound to have a strong impact on business ethics.

To attain the goat of rapid industrialization vast quantities of tools, machines, factories, and equipment had to be accumulated in a fairly short time. In view of the relatively weak national government and the prevailing policy of laissez faire, this could only be accomplished by businessmen earning huge profits and ploughing them back into industry. Thus entrepreneurs were motivated to create whole new industries in pursuit of profit. They were allowed by society to pursue their largely self-seeking ends because they paralleled those of the nation. It was a good bargain on both sides. The businessmen earned enormous profits and became wealthy; society got the capital it needed for an industrial economy and a higher standard of living.

Most UKs accepted the idea that businessmen were making a great contribution to social welfare by maximizing profits and reinvesting them since they generally distrusted central government and advocated intense individualism. The limited-liability law that recognized the company as a legal person was commonly interpreted to be a device allowing businessmen to pursue self-interest without being held personally responsible. The Darwinian theory of the struggle for existence and survival of the fittest was influential in social thought, and it too supported the profit ethic.

The profit ethic served businessmen well in the Age of Enterprise. They accomplished their ends with a full-bodied gusto that is disappearing in the modern business world. Rights of private property were so strongly entrenched that little attention was given to questions of the social responsibility of business and the legitimacy of management power. The businessman's religious beliefs helped harmonize his philosophy and ethical ideas. The Ten Commandments were widely considered as firm and sophisticated an ethical foundation as a businessman needed. The first four commandments reminded him of his personal relationship to God, and the last six admonished him not to do such things as kill, steal, or lie in pursuit of private gain.

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Suppose a decision must be made whether or not to move a branch plant from a small town in which it is the economic mainstay to another area where production costs are lower.

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Whichever decision is made will have differential effects on the various groups involved. If the move is made and production costs are appreciably lower, profits may go up and lead to higher stockholder dividends; hourly earnings of workers may go up because of increased productivity; and customers may get a better product, a lower price, or both.

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On the other hand, the small town may become economically stagnant, and workers who are well settled in the town may face the choice of dislocation (and perhaps a cut in wages) or loss of job.